(a) In general -
(1) Grounds for action. HUD may take action under paragraph (a)(2) of this section if HUD determines that any lender or holder of a guarantee certificate:
(i) Has failed:
(A) To maintain adequate accounting records;
(B) To service adequately loans guaranteed under this section; or
(C) To exercise proper credit or underwriting judgment; or
(ii) Has engaged in practices otherwise detrimental to the interest of a borrower or the United States.
(2) Actions. Upon a determination by HUD that any of the grounds for action in paragraph (a)(1)(i), of this section apply to the holder of a guarantee certificate, HUD may:
(i) Refuse, either temporarily or permanently, to guarantee any further loans made by such lender or holder;
(ii) Bar such lender or holder from acquiring additional loans guaranteed under this part; and
(iii) Require that such lender or holder assume not less than 10 percent of any loss on further loans made or held by the lender or holder that are guaranteed under this part.
(b) Civil money penalties for intentional violations -
(1) In general. HUD may impose a civil monetary penalty on a lender or holder of a guarantee certificate if HUD determines that the holder or lender has intentionally failed:
(i) To maintain adequate accounting records;
(ii) To adequately service loans guaranteed under this section; or
(iii) To exercise proper credit or underwriting judgment.
(2) Penalties. A civil monetary penalty imposed under this section shall be imposed in the manner and be in an amount provided under section 536 of the National Housing Act (12 U.S.C.A. 1735f-1) with respect to mortgagees and lenders under that Act.
(c) Payment on loans made in good faith. Notwithstanding paragraphs (a) and (b) of this section, if a loan was made in good faith, HUD may not refuse to pay a lender or holder of a valid guarantee on that loan, without regard to whether the lender or holder is barred under this section.